The functions of the bronchiolar Clara cell are not known although it is generally believed that the cell is secretory. Using Clara cells isolated from the lungs of rabbits we have shown that the major protein secreted by bronchiolar Clara cells is a low molecular weight protein immunochemically and compositionally similar to uteroglobin, the major secretory protein of the uterine epithelium. In addition, we have identified cells of the bronchiolar and tracheal epithelium that contain the Clara cell secretory protein by using an immunogold procedure. Most of the secretory protein appears to be localized in the secretory granules of Clara cells although substantial amounts are located in the endoplasmic reticulum. The low molecular weight protein appears to consist of three major isoforms that differ in their isoelectric points. These secretory products have been used to study the differentiation of the airway epithelium in rats and rabbits. Differentiation of secretory function occurs postnatally in both species and is associated with the appearance of cytoplasmic granules.